Trust Appraisal Group has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) The method of producing an appraisal deals with an estimation which forms an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the house, less the age and physical deterioration, plus the land value. Easily the most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns figuring a comparison to comparable homes nearby. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. The Income Approach is mainly used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.
What does an appraiser do?(Go to list of questions) An appraiser produces an unbiased and well justified determination of market value, to be used in making real estate transactions. Appraisers exhibit their findings in appraisal reports.
What are the reasons a person would request services from Trust Appraisal Group ?(Go to list of questions) There are many reasons to obtain an appraisal from Trust Appraisal Group with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
What is the difference between an appraisal and a home inspection? (Go to list of questions)The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. The point of a home inspection is to evaluate the structure of the home from basement to top. Commonly, a home inspection report will discuss the amenities and the requirements of the home: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) Frankly, it's like comparing opera to country. The CMA depends on vague trends in the market. The appraisal relies on specific verifiable comparable sales. Area and construction costs are also a priority in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for assignments, regardless of their value conclusion.
What's in an appraisal report? (Go to list of questions)The main point of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the report has been delivered, how can I have assurance that the value conclusion is valid?(Go to list of questions) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(Go to list of questions) Mortgage lenders are an appraiser's typical customer, using their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Hennepin County or other areas?(Go to list of questions) One of the main things an appraiser does is to collect data. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a numerous sources. To find out about recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To double-check actual sales prices, we research items in the assessor's office and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Go to list of questions) If you're making any kind of financial decision and the value of your home matters, you'll want an appraisal. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Go to list of questions) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Does the appraiser need anything from the homeowner in advance?(Go to list of questions) The first step in most appraisals is the property inspection. During this process, we will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Go to list of questions) In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the report - it's usually included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Go to list of questions) It really depends on the market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe investment. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms are right up there with kitchens, returning 85%. Adding bedrooms and baths can also increase the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.